<span style="font-weight: bold;">CRISIL Research believes investment in rolling stock would meet the Indian Railways’ target of ~Rs.1 trillion over five years through fiscal 2020.</span><br />
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Investment opportunity stems from efforts of making rolling stock safer, faster and more efficient. The thrust on electrification is expected to give a spurt to electric locomotives, bringing down the fuel bill significantly, even as increasing investment in higher horse power locomotives will support longer rakes. The shift towards Linke Hofmann Busch (LHB) and self-propelled coaches v including lightweight Talgo aluminium coaches v will improve safety and speed and the tilt towards higher axle load of 25 tonne will improve the carrying capacity of wagons. All this has opened up avenues for PPP in various rolling stock segments. <br />
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The locomotives segment which accounts for almost half of rolling stock investments has seen a spurt in private participation of late. Alstom and GE are setting up facilities for manufacturing units that offer better efficiency and emission standards compared with existing ones. <br />
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Similar opportunities exist in coaches, which are currently being manufactured in-house. In wagons, there is significant private participation already. However, opportunities can be explored for higher axle load capacities. <br />
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<span style="font-weight: bold;">Railway investments to drive up rolling stock need</span><br />
Indian Railways handled a passenger traffic of about 8.1 billion in fiscal 2016, besides transporting 1.1 billion tonne of goods and commodities, including coal, iron ore and cement. While the demand has soared, the capacity of Indian Railways has not risen much in recent years, with rolling stock at 11,122 locomotives, 68,836 passenger coaches and 251,256 wagons.<br />
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To meet the increased demand on account of network expansion, Indian Railways has set an investment target of ~Rs 1 trillion in rolling stock in five years through fiscal 2020, over and above its increased utilisation. The target is realistic and indicates a 34 per cent jump over the preceding five years. The investments also factor the replacement of aged locomotives, wagons and coaches.<br />
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That said, the share of rolling stock in the overall capex is expected to decline, as spend on decongestion and safety are expected to grow much faster than rolling stock. Over the next three years, CRISIL Research estimates that about 35 per cent (Rs 1.6 trillion) of the investments forecast would be towards network expansion and decongestion, especially in new lines, doubling and electrification. Apart from these, investments from Rs 475 to 500 billion are anticipated in dedicated freight corridors (DFCs).<br />
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Investment in locomotives and coaches during the five years through fiscal 2020 are expected to account for more than 80 per cent of the rolling stock pie. The requirement of electric locomotives is expected to increase significantly, while increasing investment in higher horse power locomotives supports longer rakes.<br />
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<span style="font-weight: bold;">Locomotives to lead in rolling stock</span><br />
Locomotives, being the big-ticket item in rolling stock, are expected to get the bulk of the investment.<br />
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Of the 11,122 locomotives as of fiscal 2016, 5,214 were electric, amounting to a 47 per cent share, while the remaining were diesel. Given the increased thrust on electrification, the share of electric locomotives is expected to increase further. <br />
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While diesel locomotives are cheaper to operate in developed countries such as the US, Indian Railways finds them more expensive due to high taxation of fuel. For a similar load carrying capacity, the cost of carrying goods is much less for electric locomotives compared with diesel. <br />
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Yet, the existing locomotive manufacturing plants – Diesel Locomotive Works and Chittaranjan Locomotive Works – are running at peak capacity utilisation. Hence, the government has decided to set up locomotive manufacturing plants under private partnership. <br />
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Accordingly, in November 2015, private companies such as GE and Alstom have formed a joint venture with Indian Railways to manufacture diesel and electric locomotives respectively in India, as they offer better efficiency and low emissions compared to existing locomotives. While Alstom has already commenced production in October 2017, GE has recently imported a prototype of the locomotive. <br />
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The total locomotive orders for Alstom and GE are about 800 and 1,000 respectively. Procurement of about 200 more locomotives for DFCs is under discussion.<br />
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<span style="font-weight: bold;">LHB, Talgo coaches to improve safety and speed</span><br />
Investment in coaches used for transporting passengers has the second highest share among rolling stock segments. The investments are seen going into three categories of coaches v LHB, Talgo and self-propelled.<br />
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LHB and Talgo are costlier than the traditional coaches manufactured by the Integral Coach Factory. However, they offer higher safety, speed and capacity. However, self-propelled coaches are costlier than LHB and Talgo as they have an inbuilt mechanism to drive themselves. <br />
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So far, the Railways has been manufacturing most of its coaches in-house. However, self-propelled and Talgo coaches offer scope of private participation as they require better infrastructure and technology.<br />
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Private participation in wagons high, but higher axle load offers room for more<br />
Indian Railways procures about 90 per cent of its wagons from private players such as Titagarh Wagons, Texmaco Rail, BHEL, Modern Industries, etc. The recent change in procurement policy to release the full wagon contract at once to ensure continuity of production with thrust on competitive bidding is expected to boost private participation further.<br />
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Indian Railways has started procuring wagons with higher axle load of 25 tonne compared with 21.3 tonne earlier. These wagons have a payload-to-tare ratio of 4:1 compared with 3.6 tonne for conventional wagons and can run at 100 kmph in both loaded and empty conditions.<br />
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Moreover, Indian Railways is exploring new designs, such as two-deck auto car wagon that can accommodate 318 cars per rake, and is encouraging private participation in developing prototype wagons for special purposes. <br />
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<span style="font-weight: bold;">- Binaifer F Jehani, Director, CRISIL Research</span><br />
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Home » PPPs Get Rolling in Railways
PPPs Get Rolling in Railways
Roads & Highways
March 31, 2018March 31, 2018
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